B-144127, OCT. 24, 1960

B-144127, OCT. 24, 1960

TO MR. R. M. JEFFERIES, GENERAL MANAGER, SOUTH CAROLINA PUBLIC SERVICE AUTHORITY:

BY LETTER OF SEPTEMBER 28, 1960, THE DEPARTMENT OF THE INTERIOR TRANSMITTED TO THIS OFFICE FOR DIRECT SETTLEMENT YOUR CLAIM AGAINST THE SOUTHEASTERN POWER ADMINISTRATION FOR AN ALLEGED IMPROPER SPILLING OF ENERGY STORED BY YOU IN THE CLARK HILL RESERVOIR. FROM THE ADMINISTRATIVE REPORT WHICH INCLUDES COPIES OF EXTENSIVE CORRESPONDENCE BETWEEN YOU AND SOUTHEASTERN, IT APPEARS THAT THERE IS NO DISPUTE CONCERNING THE ESSENTIAL FACTS RELATED TO YOUR CLAIM. THESE FACTS MAY BE SUMMARIZED AS FOLLOWS:

ON MARCH 27, 1959, THE UNITED STATES GOVERNMENT, THROUGH THE SOUTHEASTERN POWER ADMINISTRATION OF THE DEPARTMENT OF THE INTERIOR, AND THE SOUTH CAROLINA PUBLIC SERVICE AUTHORITY EXECUTED CONTRACT NO. 14-05-001-294 FOR THE SALE AND PURCHASE OF ELECTRIC POWER GENERATED AND NOT REQUIRED IN FLOOD CONTROL OPERATIONS AT THE CLARK HILL FLOOD CONTROL PROJECT IN THE SAVANNAH RIVER BASIN.

PURSUANT TO SECTIONS 4.1 AND 3.1 OF THE CONTRACT, SOUTHEASTERN DECLARED AND MADE AVAILABLE CERTAIN QUANTITIES OF ELECTRICAL ENERGY AND CAPACITY DURING THE MONTH OF APRIL 1960. THE ENERGY WAS DECLARED AND MADE AVAILABLE ON A WEEKLY BASIS AND WAS SCHEDULED BY THE AUTHORITY AS PROVIDED IN SECTION 4.6 OF THE CONTRACT. THE AUTHORITY, HOWEVER, DID NOT ACCEPT DELIVERY OF THE ENERGY AS SCHEDULED AND THE DAILY DIFFERENCES BETWEEN THE SCHEDULED QUANTITIES AND DELIVERED QUANTITIES WERE CONSIDERED TO HAVE BEEN PLACED IN OR WITHDRAWN FROM STORAGE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14.1 (C). SECTION 14 OF THE CONTRACT PROVIDES AS FOLLOWS:

"SECTION 14. ENERGY STORAGE.

"14.1 (A) THE GOVERNMENT WILL PERMIT THE PURCHASER TO UTILIZE AS HEREIN PROVIDED, UNUSED STORAGE IN THE PROJECT RESERVOIR. FOR THIS PURPOSE, A STORAGE ACCOUNT SHALL BE MAINTAINED AND THE OPERATING REPRESENTATIVE OF THE GOVERNMENT SHALL KEEP THE OFFICIAL RECORD OF SUCH ACCOUNT.

"/B) AT THE REQUEST OF THE PURCHASER, THE GOVERNMENT WILL STORE DECLARED ENERGY FOR THE PURCHASER IN ANY UNUSED STORAGE CAPACITY WHICH THE GOVERNMENT MAY DETERMINE IS AVAILABLE FOR SUCH PURPOSE IN THE PROJECT RESERVOIR AND WILL DELIVER ENERGY WHICH THE PURCHASER HAS IN STORAGE.

THE GOVERNMENT WILL ALSO DELIVER TO THE PURCHASER FROM STORAGE, ON THE PURCHASER'S REQUEST, ENERGY WHICH THE PURCHASER DOES NOT HAVE IN STORAGE UP TO A DEBIT BALANCE OF ONE-HALF MILLION KILOWATT-HOURS.

"/C) WHEN DELIVERY OF ENERGY TO THE PURCHASER IS DIFFERENT IN ANY DAY FROM THE QUANTITY SHOWN FOR THAT DAY IN THE CURRENT SCHEDULE FOR THE DECLARATION PERIOD, SUCH DIFFERENCE SHALL BE CONSIDERED TO BE ENERGY PLACED IN OR WITHDRAWN FROM STORAGE. INADVERTENT INFLOWS FROM THE PURCHASER'S SYSTEM INTO THE PROJECT BUS SHALL BE CREDITED IN THE PURCHASER'S STORAGE ACCOUNT.

"14.2 IN THE EVENT IT BECOMES NECESSARY FOR THE GOVERNMENT TO SPILL WATER FROM THE PROJECT RESERVOIR OVER THE SPILLWAY OR THROUGH THE SLUICE GATES AS A MEANS OF KEEPING SUCH RESERVOIR UNDER PROPER CONTROL, THE KILOWATT- HOURS WHICH COULD HAVE BEEN PRODUCED FROM SUCH WATER AT THE TIME OF THE SPILL, AS DETERMINED BY THE GOVERNMENT, SHALL BE DEDUCTED PROPORTIONATELY FROM ANY CREDITS THEN EXISTING IN STORAGE ACCOUNTS OF THE PURCHASER AND OTHER CUSTOMERS. THE NECESSITY FOR SPILLING WATER SHALL BE DETERMINED BY THE GOVERNMENT. WHEN THE GOVERNMENT FINDS IT NECESSARY TO SPILL STORED ENERGY, SUCH ADVANCE NOTICE AS POSSIBLE WILL BE GIVEN THE PURCHASER.

"14.3 ANY KILOWATT-HOUR DEBIT OR CREDIT TO THE PURCHASER IN THE STORAGE ACCOUNT SHALL BE REPAID OR WITHDRAWN PRIOR TO TERMINATION OF THIS CONTRACT.

"14.4 DELIVERIES OF STORED ELECTRIC CAPACITY AND ENERGY TO THE PURCHASER OR REDUCTION IN DELIVERIES FOR THE PURPOSE OF STORING ENERGY UNDER THE TERMS OF THIS SECTION 14 SHALL IN NO WAY INTERFERE WITH THE OPERATION OF THE PROJECT RESERVOIR FOR PURPOSES OTHER THAN ELECTRIC ENERGY PRODUCTION, AS DETERMINED SOLELY BY THE GOVERNMENT.'

FROM APRIL 2 THROUGH APRIL 11, 1960, A TOTAL OF 11,607 MWH OF STORED ENERGY WAS SPILLED FROM THE RESERVOIR OF WHICH 1,669 MWH BELONGED TO THE AUTHORITY. THIS ENERGY WAS SPILLED IN CONJUNCTION WITH FLOOD CONTROL OPERATIONS WHICH THE CORPS OF ENGINEERS, UNITED STATES ARMY, CARRIES OUT IN ADDITION TO SOUTHEASTERN'S POWER OPERATION. THE PORTION OF THE RESERVOIR BETWEEN AN ELEVATION OF 330 AND 335 FEET HAS BEEN DESIGNATED TO BE USED FOR TEMPORARY FLOOD CONTROL STORAGE. WHENEVER THERE IS WATER IN THE FLOOD CONTROL POOL (ABOVE ELEVATION 330) REGULATIONS CALL FOR RELEASES TO BE MADE FROM THE CLARK HILL RESERVOIR WHICH WILL NOT BRING THE FLOW AT BUTLER CREEK BEYOND 30,000 CFS. DETERMINATION AS TO WHEN SUCH RELEASES WILL BE EFFECTED IS MADE BY THE CORPS AND THE SPILLS IN QUESTION WERE ALL MADE WHEN THE RESERVOIR ELEVATION WAS ABOVE 330 FEET. THE SPILLS WERE STARTED AT MIDNIGHT, APRIL 1-2 AND YOUR DISPATCHERS WERE NOTIFIED ON MARCH 31 AND AGAIN ON APRIL 1 THAT A SPILL WAS IMMINENT.

YOUR CLAIM THAT THE GOVERNMENT RATHER THAN THE AUTHORITY MUST BEAR THE LOSS OF THE SPILLED ENERGY STORED BY THE AUTHORITY IS PREDICATED UPON THE GOVERNMENT'S FAILURE TO GIVE ADEQUATE NOTICE OF THE SPILL AND LACK OF ANY PROVISION IN THE CONTRACT FOR SPILLING ENERGY STORED BY THE AUTHORITY UNDER THE CIRCUMSTANCES INVOLVED. AS TO NOTICE, YOUR POSITION IS THAT THE FIRST ACTUAL" NOTICE OF SPILL WAS NOT RECEIVED UNTIL AFTER THE SPILL HAD COMMENCED; THAT SUCH NOTICE AS WAS GIVEN WAS OF A STRONG POSSIBILITY THAT SPILL WOULD OCCUR DURING THE WEEKEND AND THIS BEING VAGUE AND INDEFINITE, YOU CONTEND THAT THE REQUIREMENTS OF SECTION 14.2 AS TO ADVANCE NOTICE WERE NOT MET. YOU CONTEND FURTHER THAT EVEN SUCH VAGUE WARNING WAS INADEQUATE IN POINT OF TIME FOR REMOVAL OF THE POWER, ESPECIALLY AS IT WAS KNOWN TO SOUTHEASTERN THAT WATER WAS BEING SPILLED FROM THE AUTHORITY'S OWN RESERVOIRS AT THE TIME MAKING IT IMPOSSIBLE UNDER THE CIRCUMSTANCES FOR THE AUTHORITY TO ACT UPON THE ADVICE.

WITH RESPECT TO CONTRACT AUTHORITY FOR THE SPILL, IT IS YOUR POSITION THAT THERE IS NO PROVISION FOR SPILLING THE AUTHORITY'S STORED ENERGY FOR THE PURPOSE OF MAINTAINING CERTAIN ELEVATIONS IN THE RIVER AT BUTLER CREEK GAGE DOWNSTREAM FROM THE CLARK HILL DAM. (WHILE NOT DIRECTLY RELEVANT TO THE CONCLUSION REACHED HEREIN, IT SHOULD BE NOTED THAT THE PURPOSE FOR THE SPILL WAS NOT TO MAINTAIN RIVER ELEVATIONS BUT, RATHER, TO EMPTY THE FLOOD RESERVE POOL TO ALLOW FOR FUTURE IMPOUNDING OF FLOOD WATERS.) YOU MAINTAIN THAT THE ONLY RIGHT GIVEN UNDER THE CONTRACT FOR THE SPILLING OF STORED ENERGY IS CONTAINED IN SECTION 14.2 AND MUST BE EXERCISED FOR THE PURPOSE OF "KEEPING (THE) RESERVOIR UNDER PROPER CONTROL.' AND YOU CONTEND THAT PROPER CONTROL OF THE RESERVOIR REFERS TO THE SAFETY OF THE DAM AND STRUCTURES AND THE ABILITY OF THE FACILITIES TO HOLD WATERS COMING IN FROM THE RIVER ABOVE. IN THE ABSENCE OF ANY INDICATION THAT THE SAFETY OF THE DAMS AND STRUCTURES WAS IN ANY WAY JEOPARDIZED OR WOULD HAVE BEEN EVEN IF THE SPILL HAD NOT OCCURRED, YOUR POSITION IS THAT THE LOSS OF ENERGY SHOULD HAVE BEEN BORNE BY THE GOVERNMENT IN CONNECTION WITH ITS FLOOR CONTROL OPERATIONS.

THE ISSUES TO BE RESOLVED MAY BE SUCCINCTLY SET FORTH IN TWO QUESTIONS:

1. DOES SECTION 14.2 OF THE CONTRACT AUTHORIZE THE SPILLING OF ENERGY FOR FLOOD CONTROL PURPOSES NOT RELATED TO SAFETY OF THE PROJECT STRUCTURES?

2. IF THE ANSWER TO THE FIRST QUESTION IS IN THE AFFIRMATIVE DOES SUCH NOTICE AS WAS GIVEN IN THE INSTANT CASE SATISFY THE GOVERNMENT'S OBLIGATION UNDER SECTION 14.2?

PARAGRAPH 0.2 OF THE CONTRACT PROVIDES THAT:

"0.2 WHEREAS THE SECRETARY OF THE INTERIOR IS AUTHORIZED BY SECTION 5 OF THE FLOOD CONTROL ACT OF 1944 (16 U.S.C. 1952 ED., SEC. 825S) TO TRANSMIT AND DISPOSE OF ELECTRIC POWER AND ENERGY GENERATED AT RESERVOIR PROJECTS UNDER THE CONTROL OF THE DEPARTMENT OF THE ARMY NOT REQUIRED IN THE OPERATION OF SUCH PROJECTS, AND THE SECRETARY OF THE INTERIOR HAS BY DEPARTMENTAL ORDER NO. 2558, DATED MARCH 21, 1950 (15 F.R. 1901), AS AMENDED, DELEGATED TO THE ADMINISTRATOR HIS AUTHORITY UNDER SAID SECTION 5 WITH RESPECT TO PROJECTS THEN OR THEREAFTER CONSTRUCTED IN THE STATES OF WEST VIRGINIA, VIRGINIA, NORTH CAROLINA, SOUTH CAROLINA, GEORGIA, FLORIDA, ALABAMA, MISSISSIPPI, TENNESSEE AND KENTUCKY; "

THIS PARAGRAPH CLEARLY ESTABLISHES THAT SOUTHEASTERN'S FUNCTION WAS LIMITED TO THE TRANSMISSION AND DISPOSITION OF ELECTRIC POWER AND ENERGY NOT REQUIRED IN OPERATION OF THE PROJECT FOR FLOOD CONTROL AND THAT CONTROL OF THE PROJECT WAS VESTED IN THE DEPARTMENT OF THE ARMY. THE PROJECT RESERVOIR IS THUS FIRST A FLOOD CONTROL MEASURE AND ONLY SECONDARILY A SOURCE OF ELECTRICAL ENERGY. IN THIS CONTEXT THERE IS NO QUESTION BUT THAT THE PHRASE "KEEPING SUCH RESERVOIR UNDER PROPER CONTROL, AS USED IN SECTION 14.2 GOES BEYOND THE SAFETY OF THE PROJECT STRUCTURES AND EMBRACES RELEASES FROM THE RESERVOIR FOR FLOOD CONTROL PURPOSES. MOREOVER THE CONTRACT PROVIDES IN UNEQUIVOCAL TERMS THAT THE GOVERNMENT WILL DETERMINE THE NECESSITY FOR SPILLING WATER. TO HOLD THAT UNDER THE CONTRACT THE GOVERNMENT IS NOT AUTHORIZED TO "CONTROL" THE PROJECT RESERVOIR BY SPILLING WATER WHICH CONSTITUTES ENERGY THAT THE AUTHORITY WAS OBLIGATED TO TAKE BUT APPARENTLY COULD NOT USE WOULD INDEED BE ANOMALOUS. UNDER SUCH AN INTERPRETATION THE RISK OF LOSING STORED WATER WHICH THE AUTHORITY WAS OBLIGATED TO TAKE IN THE FIRST INSTANCE WOULD BE PLACED UPON SOUTHEASTERN. THE CONTRACT CLEARLY PLACES THE BURDEN OF THE RISK OF LOSS THROUGH SPILL OF SUCH ENERGY UPON THE AUTHORITY. THERE IS NO INDICATION IN THE CONTRACT THAT THE GOVERNMENT NEED CONSIDER, IN MAKING ITS DETERMINATION TO SPILL, THAT WATER TO THE AUTHORITY'S CREDIT WOULD BE LOST.

AS TO THE NOTICE THAT WAS GIVEN, IT MUST BE RECOGNIZED THAT THE CONTRACT PROVIDES ONLY THAT ,SUCH ADVANCE NOTICE AS POSSIBLE WILL BE GIVEN THE PURCHASER.' THE ADMINISTRATIVE AGENCY REPORTS THAT THE AUTHORITY HAS CARRIER COMMUNICATION WITH THE PROJECT AT ALL TIMES AND THAT ANY AND ALL INFORMATION RESPECTING THE RESERVOIR IS CONTINUALLY AVAILABLE TO THE AUTHORITY FOR THE ASKING. IT IS ALSO POINTED OUT THAT THE AUTHORITY WAS SYSTEMATICALLY MADE AWARE OF THE WATER CONDITIONS AT CLARK HILL AS ENERGY IN EXCESS OF THE MINIMUM REQUIRED TO BE PURCHASED UNDER THE CONTRACT WAS CONSTANTLY OFFERED SINCE THE FIRST OF THE YEAR. IT IS REPORTED THAT YOU WERE AWARE THAT THE RESERVOIR CAPACITY BETWEEN 330 AND 335 IS RESERVED FOR TEMPORARY FLOOD STORAGE AND THAT USE OF WATER IN THE FLOOD CONTROL POOL FOR POWER PURPOSES MUST YIELD TO FLOOD CONTROL MEASURES. FINALLY, THE ADMINISTRATIVE AGENCY REPORTS THAT WITH THE CONSTANT CONTACT HAD BY THE AUTHORITY WITH THE PROJECT, THE AUTHORITY MUST HAVE KNOWN THAT THE RESERVOIR WAS VIRTUALLY AT THE TOP OF THE POWER POOL FOR A CONSIDERABLE PERIOD PRIOR TO THE SPILL. NOTWITHSTANDING THESE CONDITIONS THE AUTHORITY DEVIATED FROM ITS SCHEDULE FOR TAKING ENERGY SO AS TO INCREASE ITS WATER IN STORAGE. THE RISK OF DOING SO MUST HAVE BEEN APPARENT. THE CORPS OF ENGINEERS HAS OPERATIONAL RESPONSIBILITY OF THE PROJECT FOR FLOOD CONTROL PURPOSES AND MAKES THE DETERMINATION AS TO WHETHER THE FLOOD POOL IS TO BE EMPTIED. ON FEBRUARY 12, 19 AND 26 THE RESERVOIR ELEVATION WAS ABOVE 330 FEET AND NO SPILL WAS MADE. ON MARCH 25, THE ELEVATION WAS DOWN TO 327.9 FEET. BY THE END OF MARCH THE ELEVATION BEGAN TO RISE AGAIN. IT IS OBVIOUS, UNDER THE CONDITIONS PREVAILING AT THE PROJECT DURING THE MONTHS PRECEDING THE SPILL THAT SOUTHEASTERN COULD NOT SUPPLY NOTICE AS TO ANY PRECISE MOMENT THAT SPILL WOULD OCCUR. SOUTHEASTERN REPORTS THAT IT GAVE ALL THE IMMEDIATE ADVANCE NOTICE AVAILABLE TO ITSELF. UNDER THESE CIRCUMSTANCES, THE AUTHORITY WAS MADE AS FULLY COGNIZANT OF WHEN SPILL WOULD OCCUR AS WAS POSSIBLE. AND IT IS CLEAR THAT THIS MEETS THE CONTRACT REQUIREMENT OF "SUCH ADVANCE NOTICE AS POSSIBLE.'